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CLAUSE 4: TOBACCO PRODUCTS DUTY

SUMMARY

1.         Clause 4 increases the rates of excise duties on tobacco products (cigarettes, cigars, hand-rolling tobacco, other smoking tobacco and chewing tobacco) with effect from 6 pm on 7 March 2001.

DETAILS OF THE CLAUSE

2.         Subsection (1) sets out a Table of duty rates to replace that in Schedule 1 to the Tobacco Products Duty Act 1979.  The duties on all tobacco products are increased as follows:

(a) cigarettes - the ad valorem element is unchanged at 22 per cent; the specific duty is increased by approximately 2 per cent from £90.43 to £92.25 per thousand cigarettes;

(b) cigars - increased by approximately 1.8 per cent from £132.33 to £134.69 per kilogram;

(c) hand-rolling tobacco - increased by approximately 1.8 per cent from £95.12 to £96.81 per kilogram; and

(d) other smoking tobacco and chewing tobacco - increased by approximately 1.8 per cent from £58.17 to £59.21per kilogram.

3.         Subsection (2) makes the new table of duty rates effective from 6 pm on 7 March 2001.

BACKGROUND

4.         Smoking is the single greatest cause of preventable illness and premature death in the UK. Tobacco use is detrimental to health with significant wider social costs. The Government is committed to reducing smoking and meeting its target to cut deaths from cancer and coronary heart disease. Keeping the cost of tobacco high will encourage smokers to smoke less or quit the habit and encourage children and young people not to start smoking. These increases, in line with inflation, maintain the real price of cigarettes and tobacco and thereby support these vital health objectives.

5.         The duty on cigarettes has ad valorem (percentage of price) and specific (per cigarette) elements. Raising the specific duty by approximately 2 per cent and maintaining the ad valorem duty at 22 per cent increases the total duty by approximately 1.8 per cent. The duties on other tobacco products are wholly specific.

6.         The duty increase, together with consequential VAT, is equivalent to:

• 6 pence on a typical packet of 20 cigarettes;
  
  
• 2 pence on a pack of small cigars;
  
  
• 5 pence on a 25 gram pack of hand-rolling tobacco; and
  
  
• 3 pence on a 25 gram pack of pipe tobacco.

7.         The estimated revenue cost of these changes is nil against an indexed base. The RPI impact of the changes is estimated to be + 0.03 per cent.